[Federal Register Volume 84, Number 200 (Wednesday, October 16, 2019)]
[Notices]
[Pages 55351-55355]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-22481]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-87261; File No. SR-CBOE-2019-096]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Make
Minor Updates and Consolidate Various Exchange Rules in Connection With
Business Conduct on the Exchange, and Move Those Rules From the
Currently Effective Rulebook to Proposed Chapter 8 of the Shell
Structure for the Exchange's Rulebook That Will Become Effective Upon
the Migration of the Exchange's Trading Platform to the Same System
Used by the Cboe Affiliated Exchanges
October 9, 2019.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on October 4, 2019, Cboe Exchange, Inc. (``Exchange'' or ``Cboe
Options'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by the Exchange. The Exchange
filed the proposal as a ``non-controversial'' proposed rule change
pursuant to Section 19(b)(3)(A)(iii) of
[[Page 55352]]
the Act \3\ and Rule 19b-4(f)(6) thereunder.\4\ The Commission is
publishing this notice to solicit comments on the proposed rule change
from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A)(iii).
\4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Cboe Exchange, Inc. (the ``Exchange'' or ``Cboe Options'') proposes
to make minor updates and consolidate various Exchange Rules in
connection with business conduct on the Exchange, and move those Rules
from the currently effective Rulebook (``current Rulebook'') to
proposed Chapter 8 of the shell structure for the Exchange's Rulebook
that will become effective upon the migration of the Exchange's trading
platform to the same system used by the Cboe Affiliated Exchanges (as
defined below) (``shell Rulebook''). The text of the proposed rule
change is provided in Exhibit 5.
The text of the proposed rule change is also available on the
Exchange's website (http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), at the Exchange's Office of the
Secretary, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
In 2016, the Exchange's parent company, Cboe Global Markets, Inc.
(formerly named CBOE Holdings, Inc.) (``Cboe Global''), which is also
the parent company of Cboe C2 Exchange, Inc. (``C2''), acquired Cboe
EDGA Exchange, Inc. (``EDGA''), Cboe EDGX Exchange, Inc. (``EDGX'' or
``EDGX Options''), Cboe BZX Exchange, Inc. (``BZX'' or ``BZX
Options''), and Cboe BYX Exchange, Inc. (``BYX'' and, together with
Cboe Options, C2, EDGX, EDGA, and BZX, the ``Cboe Affiliated
Exchanges''). The Cboe Affiliated Exchanges are working to align
certain system functionality, retaining only intended differences,
between the Cboe Affiliated Exchanges, in the context of a technology
migration. Cboe Options intends to migrate its trading platform to the
same system used by the Cboe Affiliated Exchanges, which the Exchange
expects to complete on October 7, 2019. In connection with this
technology migration, the Exchange has a shell Rulebook that resides
alongside its current Rulebook, which shell Rulebook will contain the
Rules that will be in place upon completion of the Cboe Options
technology migration.
The Exchange proposes to consolidate current Chapter 4 and various
other current rules in connection with business conduct on the Exchange
into sections of proposed Chapter 8 (Business Conduct) in the shell
Rulebook. The Exchange notes that in addition to consolidating and
moving the various rules related to business conduct to proposed
Chapter 8, the proposed rule change deletes the rules from the current
Rulebook. The proposed rule change moves and, where applicable,
consolidates the rules as follows:
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Proposed rule Current rule
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Section A. General Conduct
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8.1 Just and Equitable Principles of 4.1 Just and Equitable
Trade. Principles of Trade.
8.2 Adherence to Law................... 4.2 Adherence to Law.
8.3 Gratuities......................... 4.4 Gratuities.
8.4 Nominal Employment................. 4.5 Nominal Employment.
8.5 False Statements................... 4.6 False Statements.
8.6 Manipulation....................... 4.7 Manipulation.
8.7 Rumors............................. 4.8 Rumors.
8.8 Disciplinary Action by Other 4.9 Disciplinary Action by
Organizations. Other Organizations.
8.9 Other Restrictions on Trading 4.10 Other Restrictions on
Permit Holders. Trading Permit Holders.\5\
8.10 Prevention of the Misuse of 4.18 Prevention of the Misuse
Material, Nonpublic Information. of Material, Nonpublic
Information.
8.11 Prohibition Against Harassment.... 4.19 Prohibition Against
Harassment.
8.12 Anti-Money Laundering Compliance 4.20 Anti-Money Laundering
Program. Compliance Program.
8.13 Third Party Deposits Prohibited... 4.21 Third Party Deposits
Prohibited.
8.14 Communications to the Exchange or 4.22 Communications to the
the Clearing Corporation. Exchange or the Clearing
Corporation.
8.15 Unbundling of Orders to Maximize 4.23 Unbundling of Orders to
Rebates of Fees. Maximize Rebates of Fees.
8.16 Supervision....................... 4.24 Supervision.
8.17 Proxy Voting...................... 4.25 Proxy Voting.
8.18 Failure to Pay Premium \6\........ 10.3 Failure to Pay Premium.
8.20 Prohibition Against Customers 6.8 Prohibition Against
Functioning as Market-Makers. Customers Functioning as
Market-Makers.
8.21 Multiple Representation Prohibited 6.55 Multiple Representation
Prohibited.
8.22 Trading by Trading Permit Holders 6.22 Trading by Trading Permit
on the Floor. Holders on the Floor.
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Section B. Position Limits, Exercise Limits, Liquidation and Reports
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8.30 Position Limits................... 4.11 Position Limits.
8.31 Position Limits for Broad-Based 24.4 Position Limits for Broad-
Index Options. Based Index Options.
8.32 Position Limits for Industry Index 24.4A Position Limits for
Options. Industry Index Options.
8.33 Position Limits for Position 24.4B Position Limits for
Limits for Options on Micro Narrow- Options on Micro Narrow-Based
Based Indexes. Indexes As Defined Under Rule
24.2(d).
8.34 Position Limits for Individual 24.4C Position Limits for
Stock or ETF Based Volatility Index Individual Stock or ETF Based
Options. Volatility Index Options.
[[Page 55353]]
8.35 Position Limits for FLEX Options.. 24A.7(a)-(c) Position Limits
and Reporting Requirements
[FLEX options, provisions
regarding position limits].
8.36 Position Limits for Binary Options 22.6 Position Limits [binary
options].
8.37 Position Limit for Range Options.. 20.6 Position Limits [range
options].
8.38 Position Limits for Corporate Debt 28.2 Position Limits [corporate
Security Options. debt security options].
8.39 Position Limits for Credit Options 29.5 Position Limits [credit
options].
8.40 Position Limits for Government 21.3 Position Limits [Treasury
Security Options. Bonds and Notes].
8.41 Position Limits on Interest Rate 23.3 Position Limits [interest
Options. rate options].
8.42 Exercise Limits
8.42(a)................................ 4.12 Exercise Limits.
8.42(b)................................ 24.5 Exercise Limits [index
options, including
Interpretations and Policies].
8.42(c)................................ 20.8 Exercise Limits [range
options].
8.42(d)................................ 28.3 Exercise Limits [corporate
debt security options].
8.42(e)................................ 21.4 Exercise Limits
[government security options].
8.42(f)................................ 23.4 Exercise Limits [interest
rate options].
8.42(g)................................ 24A.8 Exercise Limits [FLEX
options].
8.42(h)................................ 22.7 Exercise Limits [binary
options], and 29.7 Exercise
Limits [credit options].
8.43 Reports Related to Position Limits
8.43(a)-(d)............................ 4.13 Reports Related to
Position Limits.
8.43(e)................................ 20.7 Reports Related to
Position Limits and
Liquidation of Positions
[range options].
8.43(f)................................ 22.8 Reports Related to
Position Limits and
Liquidation of Positions
[binary options].
8.43(g)................................ 28.4 Reports Related to
Position Limits and
Liquidation of Positions
[corporate debt security
options].
8.43(h)................................ 29.6 Reports Related to
Position Limits and
Liquidation of Positions
[credit options].
8.43(i)................................ 21.5 Reports Related to
Position Limits and
Liquidation of Positions
(Treasury Bonds and Notes)
[government security options].
8.43(j)................................ 24A.7(d) Position Limits and
Reporting Requirements [FLEX
options, provision regarding
reporting requirements].
8.44 Liquidation of Positions.......... 4.14 Liquidation of Positions.
8.45 Limit on Outstanding Uncovered 4.15 Limit on Outstanding
Short Positions. Uncovered Short Positions.
8.46 Other Restrictions on Options
Transactions and Exercises
8.46(a)-(b)............................ 4.16 Other Restrictions on
Options Transactions and
Exercises.
8.46(c)................................ 22.9 Other Restrictions on
Binary Options Transactions,
and 24.10 Restrictions on
Contracts [index options].
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\5\ See Securities Exchange Act Release No. 86910 (September 19,
2019) (Notice of Filing and Immediate Effectiveness of a Proposed
Rule Change to Amend Rule 4.10(b) Regarding the Notice Requirement
in Connection with Trading Permit Holders that Clear Market-Maker
Trades) (SR-CBOE-2019-055). The changes in SR-C2-2019-015 are
currently effective but not yet operative; however, the proposed
rule changes assume operativeness of those effective changes.
\6\ The Exchange notes that Rule 8.25 (Restriction on Acting as
Market-Maker and Floor Broker) is currently in the shell Rulebook,
and the proposed rule change merely updates the rule number to Rule
8.19 to fit within the structure of proposed Chapter 8 in its
entirety.
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The proposed rule changes make only non-substantive changes to the
rules in order to update headings that better flow with the
consolidated rules, update references to other rule text that will be
implemented upon migration, as well as correct inaccurate references,
update certain technical text formatting that will be used in the Rules
upon migration (specifically, changing all times to Eastern Time
without time zone indication pursuant to Rule 1.6 in the shell Rulebook
which states that unless otherwise specified, all times in the Rules
are Eastern Time), and reformat the paragraph lettering and numbering.
The proposed rule also makes non-substantive changes in connection
with removing redundant rules and rule language. The proposed rule
change removes Rule 29.8 which states that current Rule 4.16 (proposed
Rule 8.46) shall be applicable to Credit Options, as this is redundant
of the rule itself. The proposed change also removes redundant language
under current Rules 21.5, 28.4, and 29.6, in connection with Government
security options, Corporate Debt Security options, and Credit Options,
respectively. The proposed rule change removes the language under each
that states that the respective rule supplements current Rules 4.13 and
4.14. This language is redundant given the fact that these rules are
being consolidated into the rules in which they reference and, as
described below, the rules in which they reference are being updated so
that they clearly cover Government security, Corporate Debt Security,
and Credit options. The proposed rule change also removes the
introductory clause (``in determining compliance with Rule 4.12'') to
current Rules 28.3, 21.4, 23.4, and 24A.8, because, as indicated in the
table above, these rules will be consolidated into current Rule 4.12
(proposed Rule 8.42) which would make this language redundant.
Additionally, the proposed rule change removes the language under
current Rules 21.5, 28.4, and 29.6 that states that for the purposes of
current Rules 4.13 and 4.14 (proposed Rules 8.43 and 8.44), references
to current Rule 4.11 (proposed Rule 8.30) in connection with position
limits shall be deemed, in the case of each respective option type, to
be to the current position limit rule that governs that option type
(e.g., in the case of Credit Options, references to current Rule 4.11
are deemed to be to current Rule 29.5). Instead, the proposed rule
change replaces the references to current Rule 4.11 in proposed Rules
8.43 and 8.44 with the phrase ``the applicable position limits Rule'',
thereby encompassing the position limit provision for all respective
options types and eliminating the need for the existing multiple cross-
reference language in currently in Rules
[[Page 55354]]
21.5, 28.4, 29.6. Likewise, the proposed rule change removes the
provision under current Rule 21A.7 which states that Rule 24A.7
supplements current Rule 4.11 generally, but supersedes Interpretations
.02 and .04 of current Rule 4.11 and all of current Rules 24.4, 24.4A,
24.4B, 24.4C and 29.5 except to the extent those Rules are referred to
in this rule. The Exchange proposes to remove the language in the
above-described rules, as it believes the multiple layers of cross-
references are unnecessarily cumbersome and potentially confusing for
investors. It believes the proposed consolidated rules with updated and
more concise cross-references make the proposed rules clear as to the
specific position limit provisions that apply to different types of
options.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Securities Exchange Act of 1934 (the ``Act'') and the rules and
regulations thereunder applicable to the Exchange and, in particular,
the requirements of Section 6(b) of the Act.\7\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \8\ requirements that the rules of an exchange be
designed to prevent fraudulent and manipulative acts and practices, to
promote just and equitable principles of trade, to foster cooperation
and coordination with persons engaged in regulating, clearing,
settling, processing information with respect to, and facilitating
transactions in securities, to remove impediments to and perfect the
mechanism of a free and open market and a national market system, and,
in general, to protect investors and the public interest. Additionally,
the Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \9\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(5).
\9\ Id.
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The proposed rule change does not make any substantive changes to
the rules and is merely intended to consolidate, reorganize, and make
nonsubstantive updates to the Exchange's rules in anticipation of the
technology migration on October 7, 2019. The Exchange believes that the
non-substantive proposed changes, which update technical text and
formatting (e.g. paragraph headings and time-related references),
update rule cross-references, correct inaccurate rule cross-references,
consolidate and reorganize rules and rule paragraphs and/or
Interpretations and Policies, and remove redundant and/or cumbersome
provisions that are potentially confusing for market participants,
particularly in light of the consolidated shell Rulebook format, will
foster cooperation and coordination with those facilitating
transactions in securities and remove impediments to and perfect the
mechanism of a free and open market and national market system by
simplifying the Exchange Rules and Rulebook as a whole, and making its
Rules easier to follow and understand, which will also result in less
burdensome and more efficient regulatory compliance.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The Exchange reiterates that
the proposed rule change is being proposed in the context of a
technology migration of the Cboe Affiliated Exchanges, and not as a
competitive filing. The Exchange does not believe that the proposed
rule change will impose any burden on intramarket competition because
it does not make any substantive changes to the current Exchange Rules.
The proposed rule change merely intends to provide consolidated rules
upon migration and consistent technical text and formatting in the
shell Rulebook that will be in place come October 7, 2019. The Exchange
does not believe that the proposed rule change will impose any burden
on intermarket competition because the proposed rules are substantively
the same as the Exchange's current rules, all of which have all been
previously filed with the Commission.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange neither solicited nor received comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \10\ and Rule 19b-
4(f)(6) thereunder.\11\
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\10\ 15 U.S.C. 78s(b)(3)(A).
\11\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change, along
with a brief description and text of the proposed rule change, at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) \12\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\13\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has asked
the Commission to waive the 30-day operative delay so that the proposal
may become operative upon filing. As the Exchange represents above, the
proposed rule change would consolidate current Chapter 4 and various
other current rules in connection with business conduct on the Exchange
into sections of proposed Chapter 8 (Business Conduct) in the shell
Rulebook and would make only non-substantive changes to the relocated
rules. The Commission believes that waiver of the 30-day operative
delay is consistent with the protection of investors and the public
interest because the proposal does not raise any new or novel issues
and makes only non-substantive changes to the rules. The Commission
therefore waives the 30-day operative delay and designates the proposal
operative upon filing.\14\
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\12\ Id.
\13\ 17 CFR 240.19b-4(f)(6)(iii).
\14\ For purposes only of waiving the 30-day operative delay,
the Commission has also considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
[[Page 55355]]
Electronic Comments
Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-CBOE-2019-096 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-CBOE-2019-096. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (http://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549 on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-CBOE-2019-096, and should be submitted
on or before November 6, 2019.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
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\15\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-22481 Filed 10-15-19; 8:45 am]
BILLING CODE 8011-01-P